Veterans Resume Court Fight Over 'Non-VA Emergency Care' Costs

Earlier this year the Department of Veterans Affairs executed a clever rewrite of a regulation to avoid reimbursing hundreds of thousands of veterans for non-VA emergency health care costs that their own insurance plans failed to pay in full.

By inserting two words -- “deductibles, coinsurance” – into the revised rule, VA successfully neutralized the impact of the 2016 Staab decision from the U.S. Court of Appeals for Veterans Claims to save billions of dollars.

That court held unanimously in Staab that VA wrongly ignored the “plain language” of a 2010 statute intended to protect veterans with health insurance from having to pay hefty out-of-pocket costs for outside emergency care.

On Tuesday a new court battle began. The non-profit National Veterans Legal Services Program (NVLSP), which two years ago helped to defeat VA on behalf of the same class of veterans with unreimbursed emergency care expenses, filed a new class action lawsuit with the same appellate court in Washington D.C.

The NVLSP argues that VA again is ignoring the intent of Congress and interpreting the law improperly to avoid reimbursing these veterans for emergency care costs that their own health insurance plans don’t cover.

“They’re trying to drive a Mack truck through the statutory language,” said Barton F. Stichman, NVLSP’s executive director and lead attorney in the lawsuit. It was filed on behalf of Coast Guard veteran Amanda Jane Wolfe and thousands of other veterans who have seen their claims for non-VA emergency care costs denied since the VA interim regulation was released last January.

The lawsuit asks the appellate court to invalidate the regulation and order VA Secretary Robert Wilkie to reimburse veterans for “coinsurance and deductible” payments they incurred from emergency medical treatment at non-VA hospitals.

The regulation “is a subterfuge to get around the Staab decision,” Stichman said in a phone interview. “The VA just doesn’t want to pay these reimbursements. I have heard their excuse is Congress should pass [more] legislation addressing this issue. There’s no requirement that Congress pass a statute twice…That’s ridiculous.”

At stake for veterans and for taxpayers is a lot of money. VA initially estimated that if it complied with the Staab decision, VA health costs would climb by $2.5 billion in the first five years and by $10.6 billion over a decade. VA reduced those estimates sharply after it revised its regulation, which vastly narrowed and, in many cases, eliminated an obligation to pay veterans as a result of the Staab case.

The new lawsuit involves a different legal argument than decided in Staab, Stichman said. There the court found VA had disregarded amended law and relevant legislative history to deny expanding benefits.

The new lawsuit challenges how VA interprets the 2010 law, specifically how it defines what outside emergency care costs VA is barred from reimbursing.

The law says veterans with insurance plans are responsible for “copayments and similar payments.” The VA regulation takes that phrase and expands it to “copayments, deductibles, coinsurance and similar payments.” The practical effect, Stichman said, is to require veterans with insurance coverage to remain responsible for almost any emergency care costs their insurance won’t cover.

VA’s interpretation is “outrageous,” Stichman said. Payments truly similar to copayments would be fixed and modest. Yet “coinsurance,” as defined by Medicare and other health plans, are the “percent of costs that the enrollee must pay.” That means whatever a veteran’s own insurance plan won’t cover.

“I don’t know what the VA is paying for” under the revised regulation, Stichman said. For most veterans stuck with hefty emergency care costs, VA is providing little or no relief despite their legal victory in theStaabdecision.

“That can’t be what Congress intended,” he said.

The named plaintiff in the class action lawsuit, Ms. Wolfe, needed an emergency appendectomy in September 2016. The nearest VA hospital was three hours away so she drove to a nearby hospital’s emergency room for “life-saving surgery,” the lawsuit says. Wolfe filed a reimbursement claim with VA for $2,558, the amount her own insurance failed to cover from a total bill of $22,348.

With the hospital threatening to send her unpaid bill to collections in fall 2016, the lawsuit says, Wolfe used savings intended for post-adoption expenses to pay the balance. VA denied her claim in February 2018, one month after issuing its replacement regulation. Since then, VA informed one senator, it has used the revised regulation to settle its entire backlog of Staab cases.

The number of Staab claims settled wasn’t immediately available. The lawsuit notes that VA had estimated in a 2016 motion to the appeals court, trying to stay the Staab ruling, that it would result in more than 68 million reimbursement claims over the next 10-to-14-year period.

VA pays outside emergency care costs for veterans eligible for VA care if they have no other health insurance. But for many years the law required VA to deny claims for non-VA emergency care if the veteran had alternative health insurance through an employer or their spouse’s employer or even through Medicare.

Because this quirky situation left many thousands of veterans with large out-of-pocket costs, Congress modified the statute six years ago. VA, however, wrote implementing regulations in 2012 that continued to direct claim processors to deny reimbursement if veterans had insurance to cover part of their emergency costs.

In February 2017 a full panel of judges on the appellate court upheld the Staab decision. That June then-VA Secretary David Shulkin, who previously said Staab was wrongly decided, told senators VA had decided not to further appeal. By then VA had 370,000 pending Staab claims. Shulkin said a revised regulation was under review at the Office of Management and Budget and would take effect early in 2018. He did not signal, however, that it would neutralize the impact of Staab.

Stichman said the revised regulation distorts the meaning of “copayments and similar payments” under the 2010 statute. Copayments are small and fixed, and not at all comparable to an insured veteran’s cost share responsibility, which Congress clearly wanted VA to start covering for these veterans.

The lawsuit asks the appeals court to declare the January regulation invalid and to force VA to re-decide all Staab-related reimbursement claims using a “proper interpretation of the law.”

“The fact that we won the Staab case doesn’t mean that we automatically win this case,” Stichman said. “But we feel confident that the court should come out our way.”

Tom Philpott has been breaking news for and about military people since 1977. After service in the Coast Guard, and 17 years as a reporter and senior editor with Army Times Publishing Company, Tom launched "Military Update," his syndicated weekly news column, in 1994. "Military Update" features timely news and analysis on issues affecting active duty members, reservists, retirees and their families. Tom's freelance articles have appeared in numerous magazines including The New Yorker, Reader's Digest and Washingtonian.

His critically-acclaimed book, Glory Denied, on the extraordinary ordeal and heroism of Col. Floyd "Jim" Thompson, the longest-held prisoner of war in American history, is available in hardcover and paperback on Amazon.